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Fitch downgrades Sri Lanka

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Fitch Ratings on Wednesday downgraded Sri Lanka’s Long-Term Local-Currency (LTLC) Issuer Default Rating (IDR) to ‘C’ from ‘CC’.It said the issue ratings on local-currency bonds had also been downgraded to ‘C’ from ‘CC’.

Fitch also affirmed the Long-Term Foreign-Currency (LTFC) IDR at ‘RD’ (Restricted Default) and the Country Ceiling at ‘B-‘.Fitch said that the downgrade of Sri Lanka’s LTLC IDR reflects its view that a sovereign local-currency debt

restructuring process has begun, as parliament approved the government’s domestic debt restructuring plan on July 1.The press release said that in Fitch’s view, the proposed domestic debt optimization (DDO) strategy will qualify as a distressed debt exchange (DDE) under its criteria, as it entails a material reduction in terms and is needed to avoid a traditional payment default.

“We will downgrade the LTLC IDR to ‘RD’ upon closing of the exchange offer and following confirmation that the exchange will be executed. The government plans to complete the exchange within July,” Fitch said.

Below are excerpts of the press release: “DDO Qualifies as DDE: In Fitch’s view, the proposed DDO will qualify as a distressed debt exchange (DDE) under our criteria, as it entails a material reduction in terms and is needed to avoid a traditional payment default. We will downgrade the LTLC IDR to ‘RD’ upon closing of the exchange offer and following confirmation that the exchange will be executed. The government plans to complete the exchange within July.

“Foreign Currency IDR in Default: The sovereign remains in default on foreign-currency obligations and has initiated a debt restructuring arrangement with official and private external creditors. The Ministry of Finance had issued a statement on 12 April 2022 that it had suspended normal debt servicing of several categories of external debt, including bonds issued in international capital markets, foreign currency-denominated loan agreements and credit facilities with commercial banks and institutional lenders.

“ESG – Governance: Sri Lanka has an ESG Relevance Score of ‘5’ for Political Stability and Rights as well as for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model (SRM). Sri Lanka has a medium WBGI ranking in the 45th percentile, reflecting a recent record of peaceful political transitions, a moderate level of rights for participation in the political process, moderate institutional capacity, established rule of law and a moderate level of corruption.

ESG – Creditor Rights: Sri Lanka has an ESG Relevance Score of ‘5’ for Creditor Rights, as willingness to service and repay debt is highly relevant to the rating and is a key rating driver with a high weight. The affirmation of Sri Lanka’s LTFC IDR at ‘RD’ reflects a default event.”



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US-assisted ‘Ice’ detection: NPC to examine IGP’s move to transfer drug-busting team

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Kodithuwakku / Ekanayake

Senior DIG among those slated for transfer

By Shamindra Ferdinando

The National Police Commission (NPC) is expected to take up Police Headquarters recommendation to transfer a group of police officers responsible for a major ‘Ice’ bust at the Colombo port recently.

NPC sources told The Island that recommendation in respect of transfers was received last week. Sources said that though the NPC was scheduled to meet today (01), whether IGP Priyantha Weerasooriya’s recommendation would be discussed and decided today was not known.

Members of the NPC are retired High Court Judge Lalith Ekanayake (Chairman), K. Karunaharan, Dilshan Kapila Jayasuriya, A.A.M. Illiyas and Jayantha Jayasinghe

The IGP directed the Special Investigation Unit (SIU) to probe those who carried out the 31 August, 2026 raid that resulted in the detection of 463 kgs of ‘Ice’ concealed in a container that arrived from Pakistan.

The US Embassy declined to comment on the probe though it declared that the largest ever narcotics detection was made on intelligence made available by the US Drug Enforcement Administration (DEA).

The officers investigated for what an authoritative Headquarters source called shortcomings and lapses on the part of the raiding party, belonged to the Central Crime Investigation Bureau (CCIB). Senior DIG Ranmal Kodituwakku who, on behalf of the CCIB, received information directly from the DEA, is among those Police Headquarters wanted to transfer.

CCIB carried out the raid after having obtained a search order from the Aluthgama Magistrate court. Among the suspects taken in this connection are three Pakistani nationals.

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2027 Budget to be held from 12 Nov. to 14 Dec.

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*  First Reading of the Budget on 7 October

The Committee on Parliamentary Business has decided that the Second Reading of the Appropriation Bill for the year 2027 (Budget Speech/presentation of Budget proposals) will take place on 12 November, followed by the Second Reading debate from 13 November to 14 December.

Secretary General of Parliament Kushani Rohanadeera said this had been decided at a meeting of the Committee on Parliamentary Business held recently under the chairmanship of Speaker Dr. Jagath Wickramaratne.

Accordingly, the Appropriation Bill was scheduled to be presented to Parliament for its First Reading on 7 October, the Secretary General said.

It was also decided that the Second Reading of the Appropriation Bill (Budget Speech) would be delivered by President Anura Kumara Dissanayake, in his capacity as the Minister in charge of Finance, on Thursday, 12 November, 2026.

Thereafter, the Second Reading debate will be held for seven days, from 13 November to 20 November. Accordingly, the vote on the Second Reading will be held at 6.00 pm on 20 November.

Thereafter, the Committee Stage debate will be held for 19 days, from 21 November to 14 December , with the vote on the Third Reading of the Budget scheduled for 6.00 pm on 14 December.

During this period, the Budget debate will be held every day, including Saturdays, except on public holidays and Sundays. Parliament is scheduled to meet at 9.30 am on each of these days.

From 9.30 am to 10.00 am each day, time will be allocated for the Parliamentary business specified under Standing Order 22(1) to (6). Thereafter, five Questions for Oral Answers will be taken up from 10.00 am to 10.30 am, followed by one question under Standing Order 27(2) from 10.30 am to 11.00 am.

Accordingly, the debate is scheduled to be held from 11.00 am to 6.00 pm on all days, except the two days on which votes are scheduled to be taken, Motions at the Adjournment Time will be taken up for debate from 6.00 pm to 6.30 pm, based on a 50:50 time allocation between the Government and the Opposition, the Secretary General stated.

It was also approved that during the Second Reading debate, 60% of the debate time will be allocated to the Government and 40% to the Opposition, while during the Committee Stage debate, 40% will be allocated to the Government and 60% to the Opposition.

Furthermore, if a division is called for on an Expenditure Head, relating to a Ministry, the relevant vote will be held at 6.00 pm at the conclusion of the proceedings on the respective day.

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CB Governor confident over timely disbursement of next IMF tranche; hands post-2027 programme decisions to govt.

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Dr. Nandalal Weerasinghe

By Sanath Nanayakkare

Central Bank Governor Dr. Nandalal Weerasinghe addressed queries on the nation’s IMF bailout programme yesterday and indicated that Sri Lanka expects to reach a Staff-Level Agreement with the Fund shortly, clearing the path for the next tranche of funding under the $3 billion EFF arrangement before the end of the year.

Answering questions on Sri Lanka’s economic path, after the current programme expires in March 2027, Dr. Weerasinghe clarified that seeking a follow-up IMF arrangement was entirely a policy decision for the government rather than the Central Bank, maintaining the institutional boundary between Central Bank operations and political decision-making.

The Governor remained firm in his projection that the national economy would expand by around 4 percent throughout 2026, demonstrating economic resilience, even amid external volatilities, such as high oil prices.

Dr. Weerasinghe expressed confidence in the domestic economy’s underlying momentum. While international financial institutions and multilateral agencies had pegged Sri Lanka’s growth prospects at more conservative levels, typically around 3.0 to 3.5 percent, he emphasised that CBSL’s projections are grounded in continuous analysis of real-time indicators.

“When you compare with several other agencies, their growth projections hover around 3 to 3.5 percent. However, the economy is already growing at around 4 percent. In our projections, the economy will maintain this growth rate of around 4 percent throughout the year,” Governor Weerasinghe said.

He noted that despite mid-year quarter adjustments due to volatile oil prices, real economic indicators, including steady credit expansion across the commercial banking sector and sustained industrial and service activity, indicate that the growth trajectory remains firmly on track above the 4 percent benchmark.

Reiterating the Central Bank’s primary mandate, Dr. Weerasinghe noted that monetary policy actions remained focused on anchoring inflation and curtailing excess demand to prevent runaway price spikes.

On inflation targeting, the Governor mentioned that CBSL had submitted a technical recommendation to the Ministry of Finance to maintain an inflation target of 5 percent (+ or – 2 percent band) over the next three-year horizon.

Responding to inquiries on differing target forecasts announced by external agencies such as the IMF, Dr. Weerasinghe underscored that the Central Bank’s recommendations stem strictly from domestic technical and empirical evaluations.

“Our recommendation is based on pure technical and empirical analysis considering the country’s specific situation. We have recommended maintaining a 5 percent target for the next three years, and the government has accepted this recommendation,” he added.

Regarding foreign exchange management, the Governor noted that the Central Bank continues its active market intervention strategy aimed at smoothing out undue exchange rate volatility rather than resisting natural market trends.

Dr. Weerasinghe concluded that while the short-to-medium-term outlook remained assured, the combination of a steady 4 percent growth target and proactive fiscal measures would firmly anchor macroeconomic stability through 2026 and beyond.

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